Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Industry / Banking/  PFRDA moves to grey areas in regulation of old age income security schemes
BackBack

PFRDA moves to grey areas in regulation of old age income security schemes

PFRDA is exploring the possibility of regulating superannuation funds that are at present not regulated by any regulator

PFRDA’s move may lead to a turf war as these trusts follow the investment guidelines laid down by EPFO. Photo: Hindustan TimesPremium
PFRDA’s move may lead to a turf war as these trusts follow the investment guidelines laid down by EPFO. Photo: Hindustan Times

New Delhi: The pension fund regulator is exploring the possibility of regulating superannuation funds that are at present not regulated by any regulator, as it moves towards setting up a unified regulatory regime for old age income security post the Pension Fund Regulatory and Development Authority (PFRDA) Act.

While the insurance regulator Insurance Regulatory and Development Authority (Irda) regulates pension schemes of insurance companies, pension schemes of mutual funds are regulated by capital markets regulator Securities and Exchange Board of India (Sebi) and the Employees’ Provident Fund Organisation (EPFO) administers the contributory provident fund scheme.

But there are a few superannuation schemes of companies that are exempt by the EPF and are allowed to manage their funds through their trusts.

The idea is to address the grey area where a superannuation fund has managed to stay out of the purview of regulators, said Hemant Contractor, chairman of the Pension Fund Regulatory and Development Authority (PFRDA), who assumed charge earlier this month.

“The act empowers PFRDA to regulate the National Pension System as well as any scheme for old age income security that is not regulated by any other regulator," he said.

R.V. Verma, whole time member-finance at PFRDA, said the regulator is in the process of collating information on such funds.

“We are collecting data regarding the number of such funds, the amounts managed and other such details. Once we collate this information, we will decide how to proceed," he said.

The regulator’s move may lead to a turf war as these trusts following the investment guidelines laid down by EPFO. But PFRDA is of the view that other aspects of fund management like risk management and asset liability mismatch may not be regulated by any statute.

“PFRDA, being a regulator, is better placed to regulate all pension products and EPFO is not a regulator per se. Also, in India, it is mostly the entities that are regulated by a regulator. For instance, Irda regulates insurance companies and as a result the products they offer," said D. Swarup, former PFRDA chairman and a member of the financial sector legislative reforms commission (FSLRC).

“If the FSLRC recommendations of a unified financial sector regulator are implemented, then all the regulatory gaps will be plugged," he said.

The PFRDA Act was notified last year, empowering PFRDA to become a statutory pension regulator.

However, PFRDA only regulates the National Pension System, which was set up to manage funds of central and state government employees and for the unorganized sector. But due to the fact that the accrued amount will be taxed at the time of withdrawal, the scheme is at a distinct disadvantage compared with other similar products.

PFRDA has taken up the tax aspect with the government and is confident the issue will be addressed in the next budget, said Contractor.

The regulator is also in the process of finalizing many draft regulations, including those facilitating withdrawals and establishing points of presence.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Industry News, Banking News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 15 Oct 2014, 08:15 PM IST
Next Story footLogo
Recommended For You
Banking Stocks
₹1,053.6-0.5%
₹1,440.70.52%
₹1,0841.08%
₹122.751.3%
₹734.052.53%
Switch to the Mint app for fast and personalized news - Get App